Pound:
Sterling is trading lower this morning after reaching a new high of 1.1625 against the Euro and trading higher against the USD yesterday. In most recent UK economic data released in the early hours of this morning the Nationwide house price index came in higher than 0.4% forecast at 1.2% painting an improved picture for the health of the housing industry as activity in the sector continues to increase. The average cost of a home in the UK now lies at £163,481.
BoE policy maker Andrew sentence said this week that there is scope for a “much stronger” housing market recovery if banking problems ease and interest rates stay low. Sterling has not seen any significant rally on the back of this news despite an improvement in consumer confidence data which came out at –17 against –18 forecast.
The shine was taken off the UK when news from a league table of globalisation showed the UK fell from 10th to 15th place between 1995 and today amongst the rankings. This is a measure of a countries’ openness to foreign trade, exchange of technology and movement of labour. Any further weakness in the Euro is likely to support the pound especially if UK economic data stays stronger. Watch out for manufacturing data due out for the UK on Monday morning at 9.30am. Have a great weekend, I’m off for a legendary Southall curry tonight.
US Dollar:
The Dollar was up against the Euro this morning as risk appetite was again at a low as debt problems in the Euro zone continued to hamper the single currency’s performance. USD was still held back by Sterling however as positive sentiment for the U.K economy continued after a Nationwide survey showed U.K house prices to be at a 5 month high.
A subtle shift in the Federal Reserve’s policy and suggestions that the effects of China’s change on monetary policy were petering out have supported the Dollar of late. Even more significantly, the latest FOMC statement that the economic recovery in the U.S is self sustaining and that the loose monetary policy will not be needed after the end of March have shifted the market’s risk sentiment and led to Dollar buying, strengthening the U.S currency on the whole against the majors.
The FOMC may still have called for U.S. interest rates to stay low for an “extended period” but Kansas City Federal Reserve President Thomas Hoenig’s decision to vote against the action suggests that belief in the country’s economic upturn is growing. Confidence that the FOMC’s faith in the recovery is justified is likely only to increase more if GDP data at 1330 GMT and employment numbers at the end of next week prove positive too. GBP/USD 1/6133, EUR/USD 1.3969.
President Barack Obama Gives First State Of The Union Speech On US Economy.
Euro:
The Euro was down even further against Sterling and the Euro as widening fiscal difficulties in Europe brought the single currency down to a new six month low against the Dollar and Pound. Uncertainty over President Obama’s new banking regulations continue to support risk aversion and moves away from the Euro.
There was further concern over Portugal’s debt, as Moody’s Investors Service suggested Portugal’s deficit was a concern, saying it needs to cut debt in 2011 to avoid further threats to its AA2 sovereign rating. That added to speculation that other countries in the Euro zone may also face similar warnings. Together with existing concerns over Greece, the Euro market continues to be roiled,”The issue is getting more serious than we thought,” said Hideaki Inoue, chief manager of forex and financial products trading at Mitsubishi UFJ Trust and Banking. “It’s not just Greece, but we have to also watch Portugal, Spain and Italy,” Inoue said. European economic indicators due later could also hurt the common currency, dealers said. Unless European unemployment data for December due at 1000 GMT beats expectations, the Euro could close the week under even further pressure. GBP/EUR 1.1547, EUR/USD 1.3969
Quote of the Day
Of all our human resources, the most precious is the desire to improve.” – Anon.